Handspring trims goal for its initial stock offering

Fall in Nasdaq index and Palm Inc. values reduces IPO prospects

Computer industry

May 18, 2000|By BLOOMBERG NEWS

MOUNTAIN VIEW, Calif. - Handspring Inc., the handheld computer maker started by the people who developed the PalmPilot, cut by 40 percent the money it seeks to raise in an initial stock offering, a move that comes after shares of rival Palm Inc. dropped that much in six weeks.

Handspring hopes to make $220 million before expenses in the sale, less than the $300 million originally planned, according to a filing with the U.S. Securities and Exchange Commission. It plans to sell 10 million shares, or about an 8 percent stake, at $19 to $22 apiece.

Since Handspring filed for its initial public offering March 31, the Nasdaq composite index, which includes many computer and Internet companies, has fallen 20 percent and dozens of companies have scrapped or delayed IPOs. Handspring is betting that the expansion slot for add-on devices on its organizers will help the company attract investors as it has been luring customers.

The reduced IPO size is "not surprising," said Sally Anderson, senior fund manager at Kopp Investment Advisers. "I don't think it's a question of demand for their devices," she said. "I suspect it's more a question of how receptive the market will be to this offering."

Shares of No. 1 electronic-organizer maker Palm, which licenses its software to Handspring and is being spun off in July by 3Com Corp., fell 93.75 cents yesterday. They've dropped 41 percent since March 31 and 72 percent from the first-day trading close of $95.0625. 3Com fell 75 cents to $45.50.

When Handspring filed for its IPO, the company said it hoped to raise $300 million, without initially providing the number of shares it expected to sell or their price. A Handspring spokesman declined to comment, citing the "quiet period" before the IPO.

With about 125 million shares to be outstanding after the IPO, Handspring would have an initial market value of $2.56 billion if shares sell for $20.50 each, the middle of the estimated range. That's about one-sixth the value of Palm.

Handspring also disclosed yesterday that its loss in the fiscal third quarter that ended April 1 widened to $21.5 million from $1.89 million a year earlier as revenue rose to $34.3 million. The company lost $10.1 million on sales of $15.8 million in the prior quarter, the first in which it sold its Visor organizer.

The company said it expects to raise about $190.2 million after expenses if 10 million shares sell for $20.50 each.

Handspring's co-founders, Jeff Hawkins and Donna Dubinsky, stand to reap the most from the offering. At $20.50 a share, Hawkins' 40.9 million shares would be valued at $839.1 million, while Dubinsky's 22 million shares would be worth $451.7 million. Venture-capital firms Kleiner Perkins Caulfield & Byers and Benchmark Capital Partners each hold 18.8 million-share stakes that would be valued at $385.4 million each.

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